FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2000.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to __________________.
Commission File Number 1-644
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COLGATE-PALMOLIVE COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 13-1815595
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
300 PARK AVENUE, NEW YORK, NEW YORK 10022
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(Address of principal executive offices) (Zip Code)
(212) 310-2000
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(Registrant's telephone number, including area code)
NO CHANGES
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(Former name, former address, and former fiscal year, if changed since last
report).
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ________
-------
Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of the latest practical date:
Class Shares Outstanding Date
----- ------------------ ---------------------
Common, $1.00 par value 576,648,224 April 30, 2000
PART I. FINANCIAL INFORMATION
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COLGATE-PALMOLIVE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
-------------------------------------------
(Dollars in Millions Except Per Share Amounts)
(Unaudited)
- --------------------------------------------------------------------------------
Three Months Ended
------------------
March 31,
--------
2000 1999
-------- --------
Net sales $2,241.8 $2,175.3
Cost of sales 1,020.6 1,009.4
-------- --------
Gross profit 1,221.2 1,165.9
Selling, general and administrative expenses 816.7 801.0
Interest expense 49.1 54.0
Interest income (8.0) (8.1)
-------- --------
Income before income taxes 363.4 319.0
Provision for income taxes 123.5 110.1
-------- --------
Net income $ 239.9 $ 208.9
======== ========
Earnings per common share:
Basic $ .41 $ .35
======== ========
Diluted $ .38 $ .32
======== ========
Dividends declared per common share* $ .32 $ .28
======== ========
* Two dividends were declared in each period.
See Notes to Condensed Consolidated Financial Statements.
2
COLGATE-PALMOLIVE COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(Dollars in Millions)
(Unaudited)
- --------------------------------------------------------------------------------
ASSETS
------
March 31, December 31,
2000 1999
----------- --------------
Current Assets:
Cash and cash equivalents $ 206.4 $ 199.6
Marketable securities 56.0 35.6
Receivables (less allowances of $37.3 and $37.2) 1,136.7 1,100.8
Inventories 776.2 783.7
Other current assets 257.0 235.1
--------- ----------
2,432.3 2,354.8
Property, plant and equipment:
Cost 4,172.2 4,166.0
Less: Accumulated depreciation 1,646.7 1,614.9
--------- ----------
2,525.5 2,551.1
Goodwill and other intangibles (net of accumulated
amortization of $599.1 and $578.9) 2,165.8 2,185.4
Other assets 260.4 331.8
--------- ----------
$ 7,384.0 $ 7,423.1
========= ==========
See Notes to Condensed Consolidated Financial Statements.
3
COLGATE-PALMOLIVE COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(Dollars in Millions)
(Unaudited)
- --------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
March 31, December 31,
2000 1999
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Current Liabilities:
Notes and loans payable $ 171.1 $ 207.3
Current portion of long-term debt 347.2 338.9
Accounts payable 673.1 764.8
Accrued income taxes 133.1 116.6
Other accruals 969.2 845.9
--------- ---------
2,293.7 2,273.5
Long-term debt 2,285.4 2,243.3
Deferred income taxes 453.0 398.6
Other liabilities 699.5 674.0
Shareholders' Equity:
Preferred stock 362.7 366.5
Common stock 732.9 732.9
Additional paid-in capital 1,056.0 1,063.2
Retained earnings 4,269.0 4,212.3
Cumulative foreign currency
translation adjustments (1,143.6) (1,136.2)
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5,277.0 5,238.7
Unearned compensation (345.4) (348.6)
Treasury stock, at cost (3,279.2) (3,056.4)
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1,652.4 1,833.7
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$ 7,384.0 $ 7,423.1
========= =========
See Notes to Condensed Consolidated Financial Statements.
4
COLGATE-PALMOLIVE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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(Dollars in Millions)
(Unaudited)
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Three Months Ended
-----------------------
March 31,
--------
2000 1999
---- ----
Operating Activities:
- ----------------------
Net cash provided by operating activities $ 333.6 $ 322.0
Investing Activities:
- ---------------------
Capital expenditures (67.2) (62.5)
Payments for acquisitions, net of cash acquired - (4.3)
Investments in marketable securities (21.8) (4.2)
Proceeds from sales of long-term investments 100.9 1.5
Other (3.7) (3.6)
-------- ---------
Net cash provided by (used for) investing activities 8.2 (73.1)
Financing Activities:
- ---------------------
Principal payments on debt (55.6) (23.1)
Proceeds from issuance of debt 50.0 82.7
Dividends paid (91.8) (80.8)
Purchase of common stock (239.9) (192.1)
Other 3.9 (26.5)
-------- ---------
Net cash used for financing activities (333.4) (239.8)
Effect of exchange rate changes on
cash and cash equivalents (1.6) (1.8)
-------- ---------
Net increase in cash and cash equivalents 6.8 7.3
Cash and cash equivalents at beginning of period 199.6 181.7
-------- ---------
Cash and cash equivalents at end of period $ 206.4 $ 189.0
======== =========
See Notes to Condensed Consolidated Financial Statements.
5
COLGATE-PALMOLIVE COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(Dollars and Shares in Millions Except Per Share Amounts)
(Unaudited)
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1. The Condensed Consolidated Financial Statements reflect all normal recurring
adjustments which, in management's opinion, are necessary for a fair
presentation of the results for interim periods. Results of operations for
the three months ended March 31, 2000 and 1999 may not be representative of
results to be expected for a full year.
2. Provision for certain expenses, including income taxes, media advertising,
consumer promotion and new product introductory costs, are based on full year
assumptions. Such expenses are charged to operations in the year incurred
and are included in the accompanying condensed consolidated financial
statements in proportion with the passage of time or with estimated annual
tax rates or annual sales.
3. Inventories by major classes were as follows:
March 31, December 31,
2000 1999
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Raw materials and supplies $243.5 $259.6
Work-in-process 33.3 33.2
Finished goods 499.4 490.9
------ ------
$776.2 $783.7
====== ======
4. Earnings Per Share:
Three Months Ended March 31, 2000 Three Months Ended March 31, 1999
--------------------------------- ---------------------------------
Per Per
Income Shares Share Income Shares Share
------ ------ ----- ------ ------ ------
Net income $239.9 $208.9
Preferred dividends (5.3) (5.2)
------ ------
Basic EPS 234.6 578.2 $.41 203.7 584.2 $.35
==== ====
Stock options 10.8 12.8
ESOP conversion 5.1 43.2 4.6 44.3
------ ----- ------ -----
$239.7 632.2 $.38 $208.3 641.3 $.32
Diluted EPS ====== ===== ==== ====== ===== ====
6
COLGATE-PALMOLIVE COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(Dollars and Shares in Millions Except Per Share Amounts)
(Unaudited)
- --------------------------------------------------------------------------------
5. Comprehensive income
Comprehensive income is comprised primarily of net earnings and currency
translation gains and losses. Total comprehensive income for the three
months ended March 31, 2000 and 1999 was as follows:
Three months ended March 31,
2000 1999
------ -------
Net income $239.9 $ 208.9
Foreign currency translation adjustment due to
devaluation of Brazilian Real 11.8 (224.0)
Other foreign currency translation adjustments (19.2) (26.3)
------ -------
Total comprehensive income (loss) $232.5 $ (41.4)
====== =======
The charge to cumulative translation adjustment resulting from the devaluation
of the Brazilian Real in the three months ended March 31, 1999 related to
foreign currency denominated goodwill and property, plant and equipment and
did not include economic losses on monetary assets.
6. Segment Information -
Three months ended March 31,
2000 1999
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Net Sales
North America $ 547.9 $ 533.3
Latin America 588.4 534.5
Europe 462.4 501.5
Asia/Africa 375.5 361.0
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Total Oral, Personal and
Household care 1,974.2 1,930.3
Total Pet Nutrition 267.6 245.0
-------- --------
Net Sales $2,241.8 $2,175.3
======== ========
Earnings
North America $ 114.3 $ 113.0
Latin America 141.6 128.2
Europe 84.2 89.6
Asia/Africa 47.5 42.4
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Total Oral, Personal and
Household Care 387.6 373.2
Total Pet Nutrition 55.6 44.5
Corporate (38.7) (52.8)
-------- --------
Earnings before interest and
taxes 404.5 364.9
Interest expense, net (41.1) (45.9)
-------- --------
Income before income taxes $ 363.4 $ 319.0
======== ========
7
COLGATE-PALMOLIVE COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(Dollars and Shares in Millions Except Per Share Amounts)
(Unaudited)
- --------------------------------------------------------------------------------
7. Reference is made to the Company's Annual Report on Form 10-K filed with
the Securities and Exchange Commission for the year 1999 for a complete set
of financial notes including the Company's significant accounting policies.
8
COLGATE-PALMOLIVE COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
(Dollars in Millions Except Per Share Amounts)
- --------------------------------------------------------------------------------
Results of Operations
- ---------------------
Worldwide sales reached $2,241.8 in the first quarter of 2000, a 3% increase
over the 1999 first quarter, reflecting a unit volume increase of 7% partially
offset by a decline in foreign currencies. Absent the decline in foreign
exchange rates, sales would have also grown 7%.
First quarter sales in the Oral, Personal and Household Care segment were
$1,974.2, up 2% from 1999 on volume growth of 7%.
Colgate-North America sales reached $547.9 in the first quarter of 2000. Sales,
excluding divested businesses, grew 5% on volume gains of 4% primarily driven by
the continued strength of new products introduced during 1999. These new
products included Colgate Total Fresh Stripe toothpaste, Colgate Navigator
flexible-head toothbrush, Irish Spring aloe soap and Palmolive Spring Sensations
dishwashing liquid.
Colgate-Europe sales declined 8% to $462.4 due to the negative effects of the
weakened Euro. Volume rose 3% led by the United Kingdom, Italy, France, the
Nordic Group and Central Europe. New product launches including the battery-
powered Colgate Actibrush and Colgate Fresh Confidence toothpaste added
incremental market shares across the region. Colgate-Europe also continued to
gain market share in the Personal and Household Care category with products such
as Palmolive Aquarium liquid soap, new varieties of Palmolive shower gel and
Ajax antibacterial products.
Colgate-Latin America sales increased 10% to $588.4 as volume increased 11%.
The increased sales were fueled by strong growth in Mexico, Central America, the
Caribbean, Venezuela, Colombia, Ecuador and Peru. The introduction of Colgate
Fresh Confidence toothpaste in 12 new countries contributed to increased sales
in this region. The region also had market share gains in the Personal and
Household Care category that were driven by products such as Palmolive
Botanicals shampoo and bar soap and Ajax Fiesta de Flores fragranced cleaner.
Colgate-Asia/Africa first quarter sales increased 4% to $375.5 on volume growth
of 9%. China continued its significant growth through geographic expansion as
well as the introduction of new products including Colgate whitening toothpaste
and Softlan fabric softener. Volume growth was also strong in India, Thailand,
Malaysia and the Philippines led by new products such as the Colgate Total
Professional toothbrush, Palmolive liquid hand soap and shower gel, Ajax Fete
des Fleurs cleaner and Palmolive Botanicals translucent soap.
Sales in the Pet Nutrition segment increased 9% to $267.6 on volume gains of 9%,
with strong volume increases in both domestic and international regions. Hill's-
International benefited from continued improvements in marketing and customer
service programs, as well as the introduction of new products, such as Science
Diet hairball control for cats which helped to increase shares in the Japanese
market.
Worldwide gross profit margin for the first quarter of 2000 increased to 54.5%
from 53.6%, benefiting from continued streamlining of manufacturing, global
sourcing and other cost reduction programs.
9
COLGATE-PALMOLIVE COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
(Dollars in Millions Except Per Share Amounts)
- --------------------------------------------------------------------------------
Selling, general and administrative expenses as a percentage of sales decreased
slightly to 36.4% from 36.8% in 1999.
During the quarter, the Company incurred one-time charges of $18.7 million
related to further manufacturing consolidation and the write-down of certain
assets in Africa. Almost all of these one-time restructuring charges were
offset by a one-time gain recorded on the sale of real estate property.
Earnings before interest and taxes (EBIT) increased 10.9% to $404.5, and reached
a level of 18.0% of sales.
Interest expense, net of interest income decreased to $41.1 in the 2000 first
quarter as compared with $45.9 in 1999. The decrease is primarily a result of
lower average debt levels during the quarter.
The effective tax rate was 34.0% and 34.5% in the first quarter of 2000 and
1999, respectively. The 34.0% reflects the Company's current estimate of its
full year effective income tax rate which is slightly higher than the 1999 full
year rate of 32.8%. The rate in 1999 benefited from global tax planning
strategies, including the realization of tax credits.
First quarter 2000 net income increased 14.8% to $239.9 while diluted earnings
per share increased 18.8% to $.38.
Liquidity and Capital Resources
- -------------------------------
Net cash provided by operations increased to $333.6 in the 2000 first quarter
compared with $322.0 in the 1999 first quarter. At March 31, 2000, $520.6 of
commercial paper was classified as long-term debt in accordance with the
Company's intent and ability to refinance these obligations on a long-term
basis.
Reference should be made to the Company's 1999 Annual Report on Form 10-K for
additional information regarding available sources of liquidity and capital.
10
COLGATE-PALMOLIVE COMPANY
PART II. OTHER INFORMATION
- -------- -----------------
- --------------------------------------------------------------------------------
Item 1. Legal Proceedings
- ------- -----------------
For information regarding legal matters refer to Note 14 to the
consolidated financial statements on page 36 of the registrant's Annual
Report on Form 10-K for the year ended December 31, 1999.
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
(a) Exhibits:
Exhibit 12 Ratio of Earnings to Fixed Charges.
Exhibit 27 Financial Data Schedule.
(b) Reports on Form 8-K.
None.
The exhibits indicated above which are not included with the Form 10-Q are
available upon request and payment of a reasonable fee approximating the
registrant's cost of providing and mailing the exhibits. Inquiries should be
directed to:
Colgate-Palmolive Company
Office of the Secretary (10-Q Exhibits)
300 Park Avenue
New York, NY 10022-7499
11
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COLGATE-PALMOLIVE COMPANY
-------------------------
(Registrant)
Principal Financial Officer:
May 8, 2000 /s/ Stephen C. Patrick
-------------------------------
Stephen C. Patrick
Chief Financial Officer
Principal Accounting Officer:
May 8, 2000 /s/ Dennis J. Hickey
-------------------------------
Dennis J. Hickey
Vice President and
Corporate Controller
12
Exhibit 12
----------
COLGATE-PALMOLIVE COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
-------------------------------------------------
(Dollars in Millions)
(Unaudited)
- --------------------------------------------------------------------------------
Three Months Ended
March 31, 2000
--------------
Income before income taxes $363.4
Add:
Interest on indebtedness and amortization of debt expense and
discount or premium 49.1
Portion of rents representative of interest factor 8.5
Interest on ESOP debt, net of dividends 0.7
Less:
Income of less than fifty-percent owned subsidiaries (1.2)
------
Income as adjusted $420.5
======
Fixed Charges:
Interest on indebtedness and amortization of debt expense and
discount or premium $ 49.1
Portion of rents representative of interest factor 8.5
Interest on ESOP debt, net of dividends 0.7
Capitalized interest 1.0
------
Total fixed charges $ 59.3
======
Ratio of earnings to fixed charges 7.1
======
In June 1989, the Company's leveraged employee stock ownership plan (ESOP)
issued $410.0 of long-term notes due through 2009 bearing an average interest
rate of 8.7%. These notes are guaranteed by the Company. Interest incurred on
the ESOP's notes during the first quarter of 2000 was $8.0. This interest is
funded through preferred and common stock dividends. The fixed charges
presented above include interest on ESOP indebtedness to the extent it is not
funded through preferred and common stock dividends.
13
5
1,000,000
3-MOS
DEC-31-2000
JAN-01-2000
MAR-31-2000
206
56
1,174
37
776
2,432
4,172
1,647
7,384
2,294
2,285
0
363
733
557
7,384
2,242
2,242
1,021
817
0
0
41
363
123
240
0
0
0
240
.41
.38
